The removal of carbon tax revenues and the creation of the Emission Reduction Fund (ERF) will create a $24 billion to $40 billion budget problem for the Federal Government, according to Climate Institute CEO John Connor.
To the year 2020, he said the government’s carbon pollution policy will have a $24 billion impact while at the same time independent assessments estimate carbon pollution will continue to increase over that time.
“Achieving pollution not just expenditure targets will cost around $40 billion,” Connor said.
“This budgetary impact not only affects broader choices but the loss of carbon revenue also threatens funds now supporting clean energy, low emission programs, technology research and development, as well as support for households and business.
“The sum of $24 billion could cover federal funding for the Gonski school reforms to 2020 or all costs for the National Disability Insurance Scheme for that period, while the larger $40 billion is the equivalent of total annual spending on pensions.”
The Climate Institute has calculated the net fiscal hit under a number of scenarios, to illustrate the impact on the budget from the ERF and removing the carbon price.
They are outlined in a policy brief released this month.
“Over the four years of the forward estimates, the government has indicated it would spend $2.55 billion of taxpayer funds to subsidise emission reduction activities via the ERF, while at the same time losing $12.55 billion from companies paying the carbon price for next financial year and purchasing permits under the European linked carbon trading scheme from July 1, 2015,” Connor said, “That adds up to a $15 billion-plus slug.”
Referring to the government’s ERF whitepaper, Connor said a number of questions remain unanswered. For example, it doesn’t address questions around safeguards to control carbon pollution beyond whatever reductions the ERF can purchase.
“It stands in stark contrast to current laws which are supporting decreased emissions but also have inbuilt default reductions of at least 12 million tonnes a year which could achieve at least 15 per cent reductions on 2000 levels by 2020,” he said.
“The even bigger problem is that in the absence of credible policy, national emissions are projected to grow by 30 per cent by 2030. Even using the most generous assumptions, the government would need to spend $3 to $5 billion every year by 2030. Repealing the carbon laws and their revenue is not only a high risk gamble with pollution policy – it is a high stakes fiscal gamble.”